TMTPost -- U.S.-listed shares of Fangdd Network Group Ltd, a Chinese provider engaged in real estate transaction digitalization services, skyrocketed 321.3% and shares of another real estate service provider FLJ Group Ltd jumped 223.6% on Friday, outperforming the stock market as the benchmark S&P 500 edged up merely 0.1%. Fandd and FLJ’s rally came right after China unveiled a host of forceful measures to shore up its property sector.
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The People's Bank of China (PBOC), the central bank, and the National Financial Regulatory Administration (NFRA), the new financial regulator, set up a year ago, announced that the minimum down payment ratios for individuals' commercial housing mortgages will be lowered to 15% for first-home purchases and 25% for second-home purchases.
According to a statement on PBOC website, the floor level of commercial mortgage rates for first and second homes will be canceled across the country. Central bank branches can determine the lower limits of commercial mortgage rates in accordance with local conditions, and financial institutions should set the floor lending rates based on their business conditions and borrower risks, the central bank said.
China also cut the loan rates of the individual housing provident fund, a long-term housing savings plan made up of compulsory monthly deposits by both employers and employees, by 0.25 percentage points from Saturday, according to the PBOC.
Starting May 18, the interest rate of first-home loans that mature within or at five years will be set at 2.35%, while the over-five-year rate will be slashed to 2.85%. For second-home purchases, the interest rate of loans that mature within or at five years will be no lower than 2.775%, while the over-five-year rate will be no lower than 3.325%.
At a press conference, PBOC said it would establish a 300-billion-yuan (about US$42.25 billion) relending facility to support the government-subsidized housing project. Local state-owned enterprises are encouraged to use the funds to buy reasonably-priced commercial homes that have completed construction, Tao Ling, the Deputy Governor of PBOC, told reporters, adding that these homes will then be used to provide affordable housing. The relending program is estimated to translate into RMB500 billion of credit overall for housing buyups, Tao said.
As for unfinished, pre-sold properties, the NFRA Deputy Director Xiao Yuanqi said that commercial banks have provided RMB935 billion in loans to finish construction on whitelisted projects since the program was released in January.
At a teleconference focused on ensuring the delivery of housing projects on Friday, Chinese Vice Premier He Lifeng called for efforts to address risks concerning unfinished commercial housing projects, ensure the delivery of housing projects, and push forward the de-stocking of commercial housing.
Local governments of regions with commercial housing stock are allowed to buy some homes at reasonable prices and provide them as affordable housing, He said.
He said the real estate market involves people's immediate interests as well as the country's overall economic and social development, calling for efforts to categorize and promote the disposal of under-construction commercial housing projects that have been sold but are hard to deliver. He also urged continued initiatives to fend off and defuse debt risks concerning property developers, and ensure the delivery of housing projects.
“The government’s purchase of housing inventory can inject more liquidity to developers, who could then have more resources for housing delivery,” Larry Hu, chief economist at Macquarie, told CNBC. “Finally the government stepped in as the buyer of the last resort.”
“This is a little bit similar to the bailing out of financial institutions going through the Great Financial Crisis,” Zhu Ning, a professor of finance with Shanghai Advanced Institute of Finance, said in an interview with Bloomberg. “But in the end unless the central government is stepping in and extends its own credit to the real estate market, it’s a little difficult or too premature for us to believe we’re out of the woods.”